Backhaus v. Lee

• Decision Date: 12 May 1923
• Court: North Dakota Supreme Court

194 N.W. 887

49 N.D. 821

HERMAN BACKHAUS and R. R. Hogue, et al., Appellants, v. T. P. LEE, F. J. McConville, Frank Goughnour, Leonard du Heaume, and Jacob Schall, as County Commissioners of Emmons County, North Dakota, et al., Respondents

Supreme Court of North Dakota

May 12, 1923

An appeal from the District Court of Emmons County, Third Judicial District, McKenna, J.

Affirmed.

Affirmed. Respondents recovered the costs of this appeal.

Lawrence Murphy & Nilles, for appellants.

"The appellant bases the argument for the validity of the contract upon the powers vested in boards of county commissioners by subdivision 3 of § 3275, Comp. Laws, 1913, which authorizes them to construct and repair bridges, and to open lay out, vacate, and change highways in the cases provided by law."

The argument is that except as may be elsewhere limited by express statutory enactment, the power conferred by the foregoing subdivision may be exercised in any manner that the county commissioners elect, and that all contracts made in exercising the power so conferred are valid, in the absence of fraud. Bayne v. Thorson, 37 N.D. 187; Dalezal v Bostick, 41 Ill. 743, 139 P. 964.

"There is not, in the common law, a maxim more eminently just and promotive of the public convenience than that of 'stare decisis.' . . . If law, well established, may be annulled by an opinion, a foundation is laid for the most restless instability. The decisions of one court may be overruled by another court, and those of the latter will have only a transient efficacy, until some further court, dissatisfied with them, shall substitute new principles in their place. No system of inflexible adherence to established law can be as pernicious as such ceaseless and interminable fluctuations." Palmer v. Mead, 7 Conn. 157.

"The rule of stare decisis means in general that, when a point has been once settled by judicial decision, it forms a precedent for the guidance of courts in similar cases. It expresses the principle upon which rests the authority of judicial decisions as precedents in subsequent litigations and adherence to it is necessary to preserve the certainty stability and symmetry of our jurisprudence." Menge v. The Madrid, 40 F. 679.

If the contracts are illegal and void, and they are each manifestly so, then the county auditor had no authority in law to issue nor has the county treasurer authority in law to pay warrants drawn on public funds, raised by taxation, in payment of the contract price and as a final completion on the part of the county of such invalid agreements. Engstad v. Dinnie, 8 N.D. 1; Story v. Murphy, 9 N.D. 115; State v. Mikkelson, 24 N.D. 175.

"The right of a taxpayer to initiate an action to enjoin municipal officials from unlawfully disbursing public funds is a right common to all taxpayers, great and small." Engstad v. Dinnie, 8 N.D. 12.

"The weight of modern authority, which concedes to the resident taxpayer the right to intervene on his own behalf as well as on behalf of the public, and invoke the powers of a court of equity to prevent the unlawful dissipation of the public funds, does not recognize the earlier doctrine of laches which defendants seek to invoke. In our judgment, no laches on the part of taxpayers or others can operate to confer authority upon the officials of a corporation in a case where such officials are wholly without power to act." Storey v. Murphy, 9 N.D. 115.

"There has been a conflict of opinion on some branches of this question; but an investigation of the authorities will show, we think, that where courts have estopped municipalities from interposing the plea of ultra vires, and from escaping the responsibility of their acts, it has been where there has been a defect in the execution of the contracts, as in the issuance of bonds, etc., and not where there has been an absolute want of power on the part of the municipality to contract." A like distinction is recognized in the Monroe Case. There the court said: "The case of Spokane St. R. Co. v. Spokane Falls, 6 Wash. 521, 33 P. 1072, is not in point. The city council had the power to grant the franchise there in controversy, in the first instance. It was a case of the defective or irregular exercise of an existing power, and not a case where the power to act in the first instance was entirely lacking." Franklin County v. Carstens (Wash.) 122 P. 1001.

The corporation cannot, in any matter, bind itself by any contract which is made without authority of law or which is against public policy and all persons contracting with a corporation are bound to know its limitations in this respect. In brief, he is not only required to see to it that his contract complies substantially with the law, but "he is compelled to go further and ascertain whether his contract is authorized by the controlling law. If he fails to do this he becomes a mere volunteer and must suffer the consequences." Roberts v. Fargo, 10 N.D. 230, 86 N.W. 726; Anderson v. International Sch. Dist. (N.D.) 156 N.W. 54; Hart v. School Dist. 24 N.D. 385.

"Ignorance of the law excuses no man."

"The learned trial court found that the parties concerned in making the contracts in question acted in the utmost good faith. In one aspect of the matter, which is probably correct, the officers doubtless had no other motive than to secure for their city a bridge as cheaply as possible. In that sense a public officer may act in good faith, and yet be a wilful law breaker and guilty of fraudulent appropriation of the people's money. If such officers knowingly or wilfully use such money contrary to law, but otherwise to accomplish a legitimate purpose in a legal sense they are guilty of acting in bad faith and of actionable misappropriation of such money, regardless of their good intentions. It will not do to allow such officers to escape responsibility in such cases because, though they broke the law, they acted in good faith. The law does not permit that, yet such species of good faith is one of the most common defenses insisted upon in cases of this kind." See Chippewa Bridge Co. v. Durand, 122 Wis. 85, 99 N.W. 603, 106 Am. St. Rep. 931. See also Peet v. Leinbaugh (Iowa) 164 N.W. 128.

Such agreements are "illegal and void" and the question of ratification cannot arise where no power existed in the first place to make the agreement. Goose River Bank v. School Dist. 1 N.D. 26; Capital Bank v. Sch. Dist. 1 N.D. 479, 48 N.W. 363; Engstad v. Dinnie, 8 N.D. 1, 76 N.W. 292; Roberts v. Fargo, 10 N.D. 230, 86 N.W. 726; Fox v. Wallely, 13 N.D. 610, 102 N.W. 161; State v. School Dist. 18 N.D. 616, 120 N.W. 555; Bartells v. Sch. Dist. (N.D.) 174 N.W. 78; Henderson v. Sch. Dist. 41 N.D. 641; Capital Bank v. School Dist. 1 N.D. 485; State v. Getchell, 3 N.D. 248.

To give the statute the interpretation contended for, would be to invest in the county commissioners such power to construct bridges at their own discretion and will as would preclude entirely the exercise of a similar power by petition. Brady v. New York, 16 How. Pr. (N. Y.) 432; Baltimore v. Reynolds, 20 Md. 1, 83 Am. Dec. 585; People v. Gleason, 121 N.Y. 631, 25 N.E. 4; Addis v. Pittsburg, 85 Pa. 379; Chippewa Bridge v. Durand, 122 Wis. 85, 106 A. S. R. 931, 99 N.W. 603; Keane v. New York, 88 A.D. 542, 85 N.Y.S. 130; 1 Beach, Pub. Corp. § 698; 1 Dill. Mun. Corp. 4th ed. § 466; Colorado Springs v. Coray (Colo.) 139 P. 1037; Cement Company v. Tracy (Minn.) 176 N.W. 189; Moore v. Hupp (Idaho) 105 P. 212; McNaye v. Lome (Ind.) 84 N.E. 782; Kelley v. Tonington (Conn.) 68 A. 857.

"There can be no estoppel by conduct or ratification where there is a want of power." State v. School Dist. 18 N.D. 616, 120 N.W. 555.

"The retention by a municipality of the fruits of such a contract will not subject it to liability under the contract or upon quantum meruit." Cement Co. v. Tracy (Minn.) 176 N.D. 189; Henderson v. School Dist. 41 N.D. 640.

"But it is a remarkable claim that, where work is done under such a contract, the contract may be treated as null, and the services regarded as rendered properly. No one can use a void contract as a means of getting better terms than he could have claimed under it. The whole transaction is covered by the same taint, and must be treated as beyond the protection of courts of justice." Ridgway v. Wetterhold (Kan.) 153 P. 491.

"It has long been the conceded province of a court of equity to restrain the unlawful plans and purposes of public officials in cases where the same threaten in large measure to dissipate the public funds."

"Ratification presupposes the power on the part of the board to make the original contract and that body having no power there is no question here of ratification." Fox v. Wallely, 13 N.D. 610; Storey v. Murphy, 9 N.D. 115; Colorado Springs v. Coray, 139 P. 1038.

Scott Cameron, Zuger & Tillotson, for respondents.

It is to be kept in mind that the term ultra vires is used in many different senses. . . . The first of these describes a contract which is not within the scope of the powers of a corporation to make under any circumstances, or for any purpose; for example . . . it was held to be wholly outside of a city's power . . . to pay money to aid in building a shoe factory within its limits; to aid in the construction of a dam for the purpose of improving a private water power, to construct a building for the use of another municipality or other third person. . . .

The second of these meanings refers to contracts of a class which the corporations had a right to execute, but with respect to which there has been some irregularity or defect in the actual exercise of the power . . . affecting the individual contract at issue.

The former class is ultra vires in the primary, and really only proper, use of the...